UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-18349
THE MNI GROUP INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW JERSEY 22-2383025
------------------------------- -----------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER)
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10 WEST FOREST AVENUE, ENGLEWOOD, NEW JERSEY 07631
--------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(201) 569-1188
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days [ ] Yes [X] No.
Applicable Only to Issuers Involved in Bankruptcy
Proceeding During the Preceding Five Years:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. [ ] Yes [ ] No
Applicable Only to Corporate Issuers:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
4,685,709 shares of Common Stock at September 15, 1998
<PAGE>
THE MNI GROUP, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, January 31,
1998 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 7,600 $ 36,900
Accounts receivable (net of allowance) 143,400 131,400
Inventories 128,800 126,100
Other current assets 19,100 7,800
----------- -----------
Total current assets 298,900 302,200
----------- -----------
Furniture, fixtures and leasehold improvements (net) 900 1,500
Goodwill, net of amortization 343,200 347,600
Other assets 15,700 15,700
----------- -----------
359,800 364,800
----------- -----------
$ 658,700 $ 667,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 292,000 $ 266,200
Accrued expenses and other liabilities 335,500 292,300
Notes payable 89,800 160,200
Due to officers 278,600 147,600
----------- -----------
Total current liabilities 995,900 866,300
----------- -----------
Notes payable (net of current portion) 75,000 75,000
Excess of purchase price over basis of assets acquired
net of amortization 153,000 155,200
----------- -----------
228,000 230,200
----------- -----------
Stockholders' (deficiency):
Common stock, no par value; 10,000,000 shares
authorized; shares issued and outstanding -
July 31, 1998 and January 31, 1998 - 4,685,709 7,576,400 7,576,400
Accumulated deficit (8,141,600) (8,005,900)
----------- -----------
(565,200) (429,500)
----------- -----------
$ 658,700 $ 667,000
=========== ===========
</TABLE>
The accompanying notes are an integral part hereof.
1
<PAGE>
<TABLE>
<CAPTION>
THE MNI GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended Three Months Ended
July 31, July 31,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 667,700 $ 638,600 $ 299,200 $ 336,000
--------- --------- --------- ---------
Cost of sales and operating expenses:
Cost of merchandise sales 432,600 390,800 192,500 209,900
Selling, general and
administrative expenses 339,200 273,000 168,400 149,600
Advertising and marketing 10,600 -- 7,700 --
--------- --------- --------- ---------
782,400 663,800 368,600 359,500
--------- --------- --------- ---------
(Loss) from operations (114,700) (25,200) (69,400) (23,500)
Other income (expense):
Interest expense (21,000) (10,200) (11,100) (5,200)
--------- --------- --------- ---------
Net (loss) ($135,700) ($ 35,400) ($ 80,500) ($ 28,700)
========= ========= ========= =========
Shares used in computing
earnings per common and
common equivalent share:
(Loss) per share:
Basic loss per
share $ (.03) $ (.01) $ (.02) $ (.01)
========= ========= ========= =========
Weighted average
number of shares
outstanding 4,685,709 3,710,709 4,685,709 3,710,709
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part hereof.
2
<PAGE>
THE MNI GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
July 31,
----------------------
1998 1997
(Unaudited) (Unaudited)
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($135,700) ($ 35,400)
Adjustments to reconcile net (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 2,800 (1,100)
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (12,000) 94,300
(Increase) decrease in inventories (2,700) (10,100)
(Increase) decrease in prepaid expenses and other
assets (11,300) 7,800
Increase (decrease) in accounts payable 25,800 14,900
Increase in accrued expenses and other
liabilities 43,200 18,600
--------- ---------
Net cash provided by operating activities (89,900) 89,000
--------- ---------
Cash flows from financing activities:
Decrease in loans from officers (70,400) --
Increase in loans from officers 196,350 --
Reduction in loans from officers (65,350) (49,000)
Reduction in long-term debt -- (20,800)
--------- ---------
Net cash (used) by financing activities 60,600 (69,800)
--------- ---------
Increase (decrease) in cash (29,300) 19,200
Cash at beginning of period 36,900 13,000
--------- ---------
Cash at end of period $ 7,600 $ 32,200
========= =========
Supplemental information:
Interest expense paid $ 21,000 $ 10,200
Federal income tax -- --
</TABLE>
The accompanying notes are an integral part hereof.
3
<PAGE>
THE MNI GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position of the company as of July 31, 1998, and the results of its
operations and cash flows for the six months ended July 31, 1998 and 1997.
Such financial statements have been condensed in accordance with the
applicable regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's audited financial
statements for the year ended January 31, 1997, which is included in its Form
10K filed in May 1997. The results of operations for the period ended July
31, 1998 are not necessarily indicative of the operating results for the full
year.
1. INCOME PER SHARE:
Income per share is computed on the weighted average number of shares
outstanding. The inclusion of common stock equivalents (warrants and options)
in this computation would be antidilutive.
2. YEAR 2000 DATA PROCESSING ISSUES:
The Company has made an assessment of its year 2000 computer needs. Inasmuch
as most of the Company's accounting records are manually processed, the
Company should not incur any additional costs in addressing this concern.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
JULY 31, 1998
RESULTS OF OPERATIONS
The results of operations for the six and three months ended July 31, 1998
include the operations of K.O.S. Industries, Inc. (KOS) which was acquired as a
wholly owned subsidiary on August 1, 1997. The acquisition is being treated as a
purchase, therefore comparable results are not presented for the prior periods.
This has resulted in three month and six month differences between the operating
results for 1998 and 1997.
The Company incurred a loss of $135,700 for the 6 month period ended July 31,
1998 primarily due to a decrease in sales to one major customer in its
nutritional support products division and continuing losses from its KOS
subsidiary.
Sales for the three months ended July 31, 1998 were $299,200 as compared with
sales of $336,000 for the comparable period in 1997, a decrease of 11% due to
the reasons previously noted above. Cost of sales decreased from $209,900 for
the three months ended July 31, 1997 or 62.5% of sales to $192,500, or 64.3 % of
sales, for the comparable period in 1998. Selling, general and administrative
expenses increased 12.6% to $168,400 from $149,600. For the three months ended
July 31, 1998, the Company incurred an operating loss of $69,400 and a net loss
of $80,500 or ($.02) per share, as compared to an operating loss of $23,500 and
a net loss of $28,700 or ($.01) per share, for the comparable period of 1997.
The increased loss was primarily due to an overall decrease in sales.
Interest expense was $11,100 for the three months ended July 31, 1998, as
compared to $5,200 during the comparable period of 1997 due to increased
advances from its president.
Sales for the six months ended July 31, 1998 were $667,700 as compared with
sales of $638,600 for the comparable period in 1997, an increase of 4.6%. Cost
of sales increased from $390,800 for the six months ended July 31, 1997 or 61.2%
of sales to $432,600, or 64.8% of sales, for the comparable period in 1998.
Selling, general and administrative expenses increased 24.2% to $339,200 from
$273,000. For the six months ended July 31, 1998, the Company incurred an
operating loss of $114,700 and a net loss of $135,700 or ($.03) per share, as
compared to an operating loss of $25,200 and a net loss of $35,400 or ($.01) per
share, for the comparable period of 1997.
Interest expense was $21,000 for six months ended July 31, 1998, as compared to
$10,200 during the comparable period of 1997.
5
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1998, the Company had cash of $7,600 as contrasted with cash of
$36,900 on January 31, 1998. In addition, the Company had unfilled sales orders
of approximately $170,000 as of July 31, 1998 of which $145,000 were shipped in
August 1998. The Company has not experienced any difficulties in obtaining
mechandise from its vendors. There is no assurance that the Company will be able
to obtain sufficient cash to fund its operations. Management believes that the
Company requires additional financing to conduct its operations on a profitable
basis and to develop and market additional products and programs. The Company is
continually engaged in an effort to obtain such funding.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MNI GROUP INC.
(registrant)
September 16, 1998 By: /s/ Arnold M. Gans
---------------------------
Arnold M. Gans
President
(Principal Operating Officer
and Principal Accounting and
Financial Officer)
7
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000722617
<NAME> The MNI Group Inc.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<EXCHANGE-RATE> 1
<CASH> 7,600
<SECURITIES> 0
<RECEIVABLES> 143,400
<ALLOWANCES> 0
<INVENTORY> 128,800
<CURRENT-ASSETS> 298,900
<PP&E> 900
<DEPRECIATION> 0
<TOTAL-ASSETS> 658,700
<CURRENT-LIABILITIES> 995,900
<BONDS> 0
0
0
<COMMON> 7,576,400
<OTHER-SE> (8,141,600)
<TOTAL-LIABILITY-AND-EQUITY> (565,200)
<SALES> 667,700
<TOTAL-REVENUES> 667,700
<CGS> 432,600
<TOTAL-COSTS> 782,400
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,000
<INCOME-PRETAX> (135,700)
<INCOME-TAX> 0
<INCOME-CONTINUING> (135,700)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (135,700)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
